It is full speed ahead on increasing green power generation capacity, but there are many options to choose from and economic viability is a key factor, experts agreed at Real Asset Media’s Infrastructure summit: Investing in New Energy briefing, which was held online on REALX.Global recently.
“Energy transition is one of the megatrends, a multi-decade process that offers many opportunities,” said Thomas van der Meij, senior portfolio manager infrastructure, Kempen Capital Management.
“The transition out of fossil fuels into renewables needs to be financed, but customers’ energy bills need to be stable and the grid must be upgraded to manage additional capacity,” he added.
Managing the transition means “keeping the lights on” and making sure the transformation process is affordable for everyone.
“In this phase government support is needed to facilitate the transition, until you get to the economies of scale and cost reductions that make it viable,” said Alejandro Ciruelos, managing director, renewable energy, Sustainable Development Capital LLP. “The next decade will be customer-driven, creating innovative solutions that deliver for people.”
The selection of renewable energy options is often dictated by geography as well as economics.
“In Northern Europe it’s clear that the economics of wind generation, both onshore and offshore, are very favourable, so there’s a lot of activity and ambitious plans in the sector in the UK, Norway and Sweden,” said Ciruelos.
In Southern Europe the focus is more on solar energy.
“We’re seeing a very quick ramp-up in Spain, Greece and Italy and the potential is amazing,” said Ciruelos. “But costs are falling, so solar is becoming increasingly viable in the North as well. In the end, the technologies that will prevail are the ones that are most economically viable.”
Carbon capture and storage is a clear way forward but the costs are still significant. Replacing “grey” hydrogen with “green” hydrogen is the quickest way to decarbonise, but it is too expensive. “Pink” hydrogen can also be produced using nuclear power, but nuclear is a divisive issue.
“No possible solution should be ruled out,” said Jim Wright, listed infrastructure fund manager, Premier Miton Investors. “If we want to get to net zero we’ll need innovative solutions and total open-mindedness.”
In the search for innovation and new solutions the basics must not be forgotten.
“Grid assets are the essential plumbing in the system,” said Wright. “We don’t know which battery technology will win, but the existing grid is key. It’s absolutely essential to the energy transition story.”